# 1. Financial Performance ## A. Key Figures * **Net Interest Income:** **₹937 Cr** (+7% QoQ) * NIM: 12.8% (stable) * **PPOP:** **₹656 Cr** * **PAT:** **₹60 Cr** * ROA: 0.9% · ROE: 3.4% * **Cash & Cash Equivalents:** **₹2,025 Cr** (3% of total assets) * Capital Adequacy Ratio: 25.5% (comfortable) ## B. Revenue & NII * **NII Growth Drivers:** Sequential increase in net interest income supported by **3% portfolio yield** and **6% interest spread**, reflecting disciplined asset pricing. ## C. Margins & ROE * **Efficiency & Profitability:** Stable NIM and tight **5% cost-to-income ratio** underpinned solid pre-provision profit generation. * **Returns Profile:** High ROA of 9% contrasts with low ROE of 4%, indicating significant capital base or leverage drag. ## D. Balance Sheet * **Liquidity & Capital Position:** Robust liquidity buffer and strong capital adequacy provide resilience and room for deployment. ## E. Cash Flow * **Cost Volatility:** Sharp sequential rise in employee costs due to resumption of bonus accruals, new hires, and annual increments, reversing prior quarter’s temporary benefit. --- # 2. Loan Book & AUM Trends ## A. Key Figures * **AUM:** ₹26,000 Cr (~flat YoY) * **Sanctions & Pipeline:** ₹3,093 Cr sanctions · ₹6,500 Cr pipeline * **Unsecured Business Loan Book:** ₹1,300 Cr (3-year tenure) * **Secured Loan Book:** ₹250 Cr mortgage · ₹134 Cr home loans * **Branch Network:** Expanded from 500 to 735 branches * **Customer Growth Guidance:** +5% to +7% net growth; ~1 lakh customers/month ## B. Portfolio Growth * **Record Disbursement Momentum:** Highest-ever Q1 disbursement achieved, signaling strong recovery and resilience post-credit cycle stress. * **Market Share Gains:** AUM-based market share rose 70 bps in FY25 to 9%, driven by deepening financial inclusion with **43% new-to-credit borrowers** in Q1. * **Stable AUM, Transitory Write-Off Impact:** AUM flat despite growth momentum due to accelerated write-offs; customer base metrics expected to normalize by year-end. * **Digital Collections Adoption Rising:** Digital repayments now represent **16% of total collections**, supported by ongoing investments in digital engagement. ## C. Retail Finance Mix * **Expanding Retail Identity:** One-third of borrowers are now unique to CA Grameen, up from 26%, reflecting improved retention and brand differentiation. * **Strategic Portfolio Shift:** Retail finance mix growing; long-term target of **50-50 split between unsecured and secured loans** as mortgage scales via existing branches. * **Efficient Scaling Model:** Retail expansion leverages **100 dedicated branches and 1,000-member team**, with no major new product rollouts planned beyond current secured offerings. * **Limited Pilots, Strict Underwriting:** Unsecured business loans offered via JLG branches under tighter norms; **two-wheeler loan pilot not expected to contribute materially**. ## D. MFI Book Share * **Diversification Roadmap in Motion:** Sanctions and pipeline largely MFI-backed; 2028 plan targets **12%-15% portfolio exposure to new asset classes**, requiring phased investments in tech and ops. * **Moderating MFI Growth Trajectory:** MFI book expected to grow **10%-15%**, below total portfolio growth of **20%-25%**, as retail and secured loans gain share. * **Evolving Customer Lifespan:** While some relationships span 15–20 years, **JLG customer tenure expected to shorten to 2–3 years** before graduation to individual loans. --- # 3. Asset Quality & Credit Costs ## A. Key Figures * PAR 15+ Accretion Rate: 0.46% in June '25 (-1.34% in Nov '24) · Karnataka: 0.58% in June '25 (from 2% peak in Feb '25) * PAR 90 / GNPA / Net NPA: 3.29% / 4.70% / 1.78% (60+ DPD basis) * **Write-offs:** **₹693 Cr** total (Q1 FY26) · **₹603 Cr** for 180+ DPD accounts * **Stage-3 Provisioning Coverage:** **63%** (slight QoQ decline) * **Excess Provisions:** **133 bps (₹331 Cr)** over PAR 90 · **323 bps (₹833 Cr)** above IRAC norms ## B. PAR & NPA Levels * **Broad Delinquency Improvement:** PAR 15+ accretion rates show meaningful decline across regions, signaling improved collections and **strong recovery trajectory** despite lingering stress in early buckets. * **Karnataka Credit Stress Persists:** Despite sequential improvement, **PAR 15 accretion remains elevated** and **PAR 0 increased**, indicating ongoing pressure, though **month-on-month stabilization** is emerging. * **Risk Concentrated in Over-Leveraged Borrowers:** **Highly indebted customers (3+ lenders)** account for **over one-third of PAR 15+ and PAR 60+**, underscoring concentration risk despite **80% repayment continuity** in this cohort. * **Partial Payments Mitigating Escalation:** **Over 40% of early-stage delinquents** are making partial payments—consistent across geographies—supporting recovery momentum and reducing near-term downgrade risk. ## C. Provisioning Coverage * **Conservative Buffer Maintained:** Company continues to provision **well above regulatory and IRAC requirements**, with **Stage-3 coverage at 60 days** (vs. 90-day industry norm), reflecting prudent risk management. * **Coverage Adjustment Explained:** Slight decline in **Stage-3 coverage to 63%** driven by **reclassification of low-risk Karnataka districts**, not asset quality deterioration; management sees current levels as adequate. ## D. Write-offs & Accretion * **Balance Sheet Normalization Ongoing:** Elevated **Q1 write-offs (₹693 Cr)** include **₹603 Cr for long-delinquent accounts**, with **6 lakh borrowers written off TTM**; bulk expected to conclude by end-Q2. * **Credit Cost Pressure Easing:** While **₹88 Cr interest write-offs** expected in Q2, tapering is anticipated from Q3 as clean-up nears completion, reducing future drag on profitability. --- # 4. Branch & Employee Expansion ## A. Key Figures * **New Branches Opened:** **54** in Q1 FY'26 (part of ~**200** planned for the year) * Branch Network Size: ~110 current branches, expanding by 10-15 * **Employee Count:** **21,333** as of end-June '25 (+363 from March '25) * Attrition Rate: 27.1% annualized in Q1 FY'26 ## B. Branch Growth * **Front-Loaded Expansion:** Aggressive branch rollout concentrated in H1, with over 50 added in Q1 and majority of annual target to be completed by Q2, driving near-term OPEX pressure. * **Geographic Scaling:** Expansion spans both established and emerging markets, with **Karnataka and Tamil Nadu** showing normative customer acquisition and no regional headwinds. * **Growth Trajectory:** Planned 8–10% branch growth reflects sustained scaling ambition across group loan and retail finance verticals. ## C. Headcount Increase * **Elevated OPEX from Hiring Surge:** Operating expenses elevated due to Q4/Q1 employee additions, annual increments, and low prior-year base; costs expected to moderate in second half. * **Stable Cost Outlook:** Full-year employee cost growth projected **below 5%**, despite short-term pressure from ~1,000 new hires in Q4 and branch ramp-up. * **Standardized Staffing Model:** Each new branch launched with a **six-person team** (field officers, manager, support), enabling predictable headcount planning. ## D. Attrition Trends * **Attrition Stabilized Firm-Wide:** Low overall attrition (1%) with stability across most states; **Tamil Nadu** sees sector-wide elevated turnover, mitigated by higher bench strength. * **People Strategy Driving Recovery:** Improved bench strength and talent management reversed prior-year attrition issues in **Bihar**, allowing resumption of growth after credit cost pressures. * **Digital Workforce Shift:** Rising female participation in digital channels supports digital collections, despite slight dip in post-9 am meeting attendance—no impact on repayments observed. --- # 5. Funding & Cost of Capital ## A. Key Figures * **Avg. Cost of Borrowings:** **9.7%** in Q1 FY'26 (↓8 bps) · **9.8%** prev. 7 qtrs * **Funds Raised:** **₹2,570 Cr** in Q1 FY'26, including **$100 Mn** multi-currency social loan * **Retail Financing Mix:** **7%** currently (from 3% last year) ## B. Borrowing Cost * **Cost Relief Ahead:** Borrowing costs expected to trend lower with **majority of benefit** from 100 bps repo cut anticipated by FY'26 end and Q1 FY'27 due to MCLR reset lags. * **Stable Lending Rates:** Company **not contemplating rate hikes** despite sectoral trends, supporting portfolio stability and demand. * **Strategic Mix Shift:** Retail financing mix rising rapidly, on track toward **12%-15% target by 2028**. ## C. Foreign Funding Mix * **International Diversification:** Targeting **25%-30% foreign borrowing** by FY'28, supported by successful recent overseas fundraising. ## D. Fundraising Activity * **Efficient Capital Access:** Q1 raise included low-cost foreign currency debt priced **below average borrowing cost**, enhancing funding flexibility. --- # 6. Credit & Regulatory Risks ## A. Key Figures * GLP (>3 pre-lenders): 11.1% Jun-25 (from 25.3% Aug-24) · GLP (>₹2L unsecured debt): 9.5% Jun-25 (from 19.1% Aug-24) * **Unsecured Debt & Obligation:** **14%** YoY drop in average total unsecured debt · **6%** YoY decline in average monthly obligation ## B. Over-Leverage Exposure * **Proactive Deleveraging:** Significant reduction in over-leveraged borrower exposure driven by pre-emptive internal credit limits, contributing to sector-wide deleveraging trends. * **Model Resilience:** JLG model remains **essential and effective** for financial inclusion, with no viable alternative currently identified for this customer segment. ## C. Regional Credit Stress * **Karnataka Recovery:** Ground-level credit conditions show consistent MoM improvement, with further decline in PAR accretion expected by end-Q2. * **Bihar Adjustments:** Performance slowdown attributed to elevated credit costs, prompting internal remedial actions including team strengthening and policy revisions. ## D. Regulatory Guardrails * **Sector Stabilization:** MFIN-imposed guardrails have enhanced lending discipline, fostering stabilization across the microfinance ecosystem. * **Portfolio Diversification:** Regulatory easing on MFI exposure (75% → 60%) opens pathways for expansion into **mortgage and other unsecured loan** segments. * **Borrower Attrition:** Industry-wide **rejection rates up 5–10%** post-guardrail 2; **~20% of borrowers have exited**, raising concerns about long-term growth sustainability. --- # 7. Guidance & Outlook ## A. Key Figures * **Growth Guidance:** **12%–15%** (retail finance-driven) · **14%–18%** (state-level, Karnataka/TN) * **Credit Cost Guidance:** **5.5%–6%** full-year · **3%–3.5%** second-half run rate · **<1%** non-annualized in Q3/Q4 * **Opex/AUM Target:** **<5%** as employee costs stabilize ## B. Growth Projections * **Favorable Macro Backdrop:** FY26 growth outlook remains strong, supported by robust rural sentiment and **favorable monsoon forecasts** enhancing H2 profitability. * **Retail-Led Expansion:** Projected growth to be primarily fueled by mortgage and individual loans, indicating strategic focus on high-potential retail segments. * **Operating Leverage Improvement:** Expected in H2 due to stabilization in write-offs and gradual customer base expansion, despite near-term Opex pressure. * **Regional Growth Resilience:** Management affirms confidence in Karnataka and Tamil Nadu performance despite competitive dynamics, underpinning guidance credibility. ## C. Credit Cost Forecast * **H2 Credit Cost Decline Expected:** Progressive improvement anticipated, with costs moderating to **<1% per quarter** on a non-annualized basis if PAR and PCR trends hold. * **Confidence in Cycle Bottom:** Management asserts the worst of the credit cycle has passed, citing month-on-month improvements and **PCR stability at 63%–65%**. * **Q2 as Key Inflection Point:** Clarity on full-year credit cost trajectory expected by end-Q2, following elevated provisioning in Q1. ## D. ROE Expectations * **H2 ROE to Reaccelerate:** Quarterly ROE projected at **~5%**, supporting an **18% annualized return**, driven by margin recovery and credit cost normalization.